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Mortgage market rebounds but loan to incomes increasingly stretched – UK Finance

  • 12/07/2018
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Mortgage market rebounds but loan to incomes increasingly stretched – UK Finance
Completions for first-time buyers, homemovers, residential remortgaging and buy-to-let remortgaging all grew strongly in May compared to same month in 2017, as the market continued to bounce back from quiet months in February and March.


However, the data from UK Finance also showed a pattern of increasing loan-to-income (LTI) ratio for borrowers over the last 12 months, suggesting affordability may be being stretched.

This was particularly so for first-time buyers who now typically require a 3.65 LTI multiple, up from 3.58 a year earlier, reflecting the rise in average loan value of £5,452 to £142,452 over the year.

The strength of buy-to-let remorgaging is not surprising given the well-trailed bubble of maturities in the first half of 2018 following the pre-tax changes spike in activity two years ago.

Buy-to-let purchases (including limited company) were the only downside, where the market slipped back significantly, particularly in the value of transactions completed.


Values and transactions up

First-time buyer mortgage completions were up 8.1% at 32,200 in May compared to May 2018, with lending value up 12.5% at £5.4bn.

Homemover mortgage completions rose 4.4% at 31,100 on May 2017, with value up 4.8% at £6.6bn.

Residential remortgaging completions were also up 7.1% at 36,000 as the value of lending rose 6.8% at £6.3bn.

In the buy-to-let sector the UK Finance data, which includes limited company transactions, revealed purchases were down 9.8% at 5,500 with their value down a significant 22.2% at £0.7bn on May 2017.

In contrast, remorgaging held up well, rising 15% at 14,600 completed deals with the value up 21.2% at £2.3bn.

UK Finance director of mortgages Jackie Bennett noted the rise in the number of first-time buyers and strong remortgaging activity.

“It is also particularly encouraging to see an increase in homemovers, after a period of relative sluggishness in this important segment of the market,” she said.

“However, affordability remains a challenge for some prospective buyers and this is reflected by a gradual increase in loan to income multiples.

“Meanwhile purchases in the buy-to-let market continue to be constrained by recent regulatory and tax changes, the full impact of which have yet to be fully felt.”



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